Unit 1 Flashcards
Define Land
All natural resources used in production.
Define Labor
All human actions(mental and physical) used in production
Define Capital
used to produce something to sell
Define Entrepreneurship
COMBINING other resources to produce a good/service for PROFIT while assuming RISK
Name the four economic systems
- Brute Force
- Traditional
- Market
- Command
What economic systems does the US have and how?
Primarily Market
Command i.e. School is required K-12
Traditional i.e. Amish or professions like teaching that runs in the family
Brute Force i.e. stealing and extortion
Circular Flow diagram
Product market(top center) points to household(middle right) points to resource market(bottom center) points to firms(left center) points to product market(top center)
Household also points to banks that points to firms which points back to banks and household
Product market(top center) also points to firms which points to resource market which points to household which points to product market
Define Market
Whenever a buyer and seller interact to make a transaction
Define Demand
the amount buyers are WILLING AND ABLE to purchase at various prices
The law of demand states that as the (blank) the (blank)
As the price of a good increases, the quantity demand decreases
or
As the price of a good decreases, the quantity demand increases
Which is not an example of opportunity cost
any monetary cost i.e. price of books, tuition, fees
Define supply
Amount sellers are WILLING AND ABLE to sell/produce at various prices
define law of supply
As the prices of the good (IN/DEC) the quantity supplied (IN/DEC) in that order
What factors can cause a change in supply
- Resource cost (land, labor, capital)
- Gov’t Policies (Taxes and subsidies)
- Technology (New, faster, better)
- Number of Sellers (more sellers more supply)
Define Equilibrium
The MARKET FORCES are in BALANCE
What movement does change in quantity supply cause
Change in quantity supply causes movement along the curve which reflects the change of price of goods
One reason the market will move towards the equilibrium price is because if the price above the equilibrium price the market will have a (blank) and will drive the prices (blank)
Surplus; down
One reason the market will move towards the equilibrium price is because if the price below the equilibrium price the market will have a (blank) and will drive the prices (blank)
Shortage; up
How do you remove a shortage (short answer)
- Price of good increases
- Increases quantity supply
- Decrease in quantity demand
How to remove a surplus (short answer)
- Price of good decreases
- Decrease quantity supply
- Increase quantity demand
Top Six GDP
- China
- USA
- India
- Japan
- Germany
- Russia
What is the difference between Nominal GDP and Real GDP?
Nominal GDP includes inflation and Real GDP removes it
What Items are not included in GDP?
- Intermediate Goods
- Imports
- Paper/ Financial Transactions(stock market)
- Transfer payments(gov takes money from one group to another like welfare)
What is PPP
Recalculation of low income nations GDP using the price from high income nations
How do you calculate GDP(In theory)
GDP= C+I+G+(X-M)
C= Consumption
I= Investments
G= Gov’t Spending
X= Exports
M= Imports
What is the difference between gross investment and Net investment
Gross investments = net investments + Replacement investments
Net investments are new investments
Define Economics
Study of how societies allocate their limited resources among their unlimited wants
Define Economic efficiency
meeting society’s wants at the lowest possible cost
Define Mixed Economy
Society with two of more economics systems
Define Investments
the purchase of capita
When the price of a good changes what type of changes does that lead to and what type of physical movement is involved(supply side)
I. Change in supply
II. Change in Quantity Supply
III. Movement of the curve right or left
IV. Movement along the curve
II and IV
Which of the following is an example of the Law of Supply?
A. the amount of ice cream sold increases while the price of the ice cream remains constant
B. an increase in the price of ice cream will decrease the supply in ice cream
C. A decrease in the price of ice cream will decrease the quantity supply of ice cream
D. An increase in the price of ice cream will be followed by an increase in the sale of ice cream
C. A decrease in the price of ice cream will decrease the quantity supply of ice cream
A. demand increases
B demand decreases
C. supply increases
D. supply decreases
which of the above will happen to the following:
1. The future price of a good is going to decrease what will happen to today
2. Taxes decrease
3. The price of a good increases, what will happen in the market for its complement
- B
- C
- B
